Sec. 13(1)(b) Embargo Applies Only to Trusts Created After Commencement of Income-Tax Act | ITAT

Case Details: Bai Navazbai Faramroze D Mehta Charity Blocks vs. Commissioner of Income-tax (Exemption) - [2024] 167 taxmann.com 218 (Surat-Trib.)[31-05-2024]

Judiciary and Counsel Details

• Pawan Singh, Judicial Member & Bijayananda Pruseth, Accountant member
• Darshit J Naik, CA for the Appellant.
• S.M. Keshkamat, CIT-DR for the Respondent.

Facts of the Case

The assessee trust was established in 1953, i.e., before the Income-tax Act of 1961 came into force. It was registered with the Charity Commissioner and under section 12A of the Act. With the introduction of the new Scheme of Registration of Charitable Trusts vide the Finance Act 2021, the assessee applied for provisional registration. Subsequently, the assessee applied for regular registration under section 12AB.

The Commissioner (Exemption), on examination of details of the object of Public Trust Registrar, noted that the object of assessee-trust was restricted to a particular community. Contending that the assessee-trust was established for the benefit of a particular community and not for the general public, opined that the provisions under section 13(1)(b) were applicable. Accordingly, the registration application was rejected.

Aggrieved assessee filed an appeal to the Surat Tribunal.

ITAT Held

The Tribunal held that while examining the application for registration, Commissioner (Exemption) is required to examine the object and activities raised by assessee-trust. So far as the objection of rejection is concerned about the applicability of section 13(1)(b), it was found that assessee-trust was established much prior to the commencement of the Income-tax Act, 1961. The assessee trust was set up in 1953, which is evident from the copy of the trust deed registered with the Charity Commissioner.

When the trust was in existence prior to the commencement of the Income-tax Act, 1961, the provisions of section 13(1)(b) had no application and was qualified for exemption being a “charitable trust”. Section 13(1)(b) applies only to charitable trusts created or established after the commencement of the 1961 Act.

Accordingly, the matter was remanded directing the Commissioner (Exemption) to reconsider the application of assessee based on the activities of the assessee-trust.

List of Cases Reviewed

• • Jayvantsinh Vagehela v. ITO (2013) 40 taxmann.com 491 (Guj)
  • Concord of India Insurance Co. Ltd. v. Smt. Nirmala Devi AIR 1979 SC 1666 (Para 8)
  • CIT v. Arya Vysya Kalyana Nilaya Sangam [1986] 159 ITR 324 (AP)/[1986] 54 CTR 155 (AP)
  • CIT v. Maheshwari Agarwal Marwari Panchayat [1982] 10 Taxman 183 (MP)/[1982] 136 ITR 556 (MP) (Para 10) followed.

List of Cases Referred to

• CIT v. Arya Vysya Kalyana Nilaya Sangam [1986] 159 ITR 324 (Andhra Pradesh) (para 5)
• CIT v. Maheshwari Agarwal Marwari Panchayat [1982] 10 Taxman 183/136 ITR 556 (Madhya Pradesh) (para 5)
• Jayvantsinh N Vaghela v. ITO [2013] 40 taxmann.com 491 (Gujarat) (para 8).